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The federal tax code allows you to deduct from your taxable income the mortgage interest you paid. To claim this deduction, you must be a homeowner who itemizes your tax deductions on Schedule A of Form 1040. You can’t claim mortgage interest on your tax return if you take the standard deduction. There are rules you must heed when deducting mortgage interest, particularly if you have more than one home.

Second Home

You can deduct the mortgage interest you paid on a second home as well as on your first home. The mortgage on your second home must be secured with the residence as the collateral. The mortgage must have been taken out to buy, build or improve the second home. You also can deduct interest on a home equity loan secured by your second home, regardless of how you used the loan proceeds.

Value Limit

The tax code imposes a limit on how much mortgage interest you can deduct. Your total combined mortgage debt on your second and first home cannot exceed $1 million if you are single or married filing jointly, or $500,000 if you are married filing separately. Your combined total home equity debt on your second and first home cannot exceed $100,000 if you are single or married filing jointly, or $50,000 if married filing separately. Interest on amounts over these debt ceilings is considered personal interest and is not deductible.

Rental Restriction

If you rent out your second home, you must heed the rental restrictions in the tax code in order to be able to deduct the mortgage interest on the residence. You must live in the second home each year for the greater of 14 days or 10 percent of the number of days the home was rented out. If you don’t live in the home for the required span of time, the Internal Revenue Service will consider it to be a rental property and you will lose the mortgage interest deduction for that home. If you aren’t renting the second home, there is no requirement that you use it during the year.

Multiple Homes

If you own three or more residences, you can choose which residences to designate as your first and second homes. You can’t take a mortgage interest deduction on more than two homes, but you can designate a different residence as your second home each tax year.

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Herb Kirchhoff has more than three decades of hands-on experience as an avid garden hobbyist and home handyman. Since retiring from the news business in 2008, Kirchhoff takes care of a 12-acre rural Michigan lakefront property and applies his experience to his vegetable and flower gardens and home repair and renovation projects.

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